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25-05-2013, 12:43 PM
Li Lu ’96 is the founder of Himalaya Capital, an investment partnership focused on both public and private opportunities in Asia and North America. Mr. Li grew up in China and was a student leader in the 1989 Tiananmen Square protests. Prior to founding Himalaya Capital in 1997, Mr. Li worked in investment banking. He earned his B.A. in economics from Columbia College, a J.D. from Columbia Law School, and an M.B.A. from Columbia Business School.
G&D: How did your unique experience as a Tiananmen Square protest leader lead you to where you are today, running Himalaya Capital?
Li Lu (LL): When I first came to Columbia University, I was dirt poor. I did not choose to come here – I just ended up here because I had nowhere else to go, having just escaped from China after Tiananmen. I was in a new country where I didn’t understand the language, didn’t know anybody, and didn’t have a penny to my name. So I was desperate and afraid. In retrospect, that is good inspiration for trying to figure out how to make money! I just wanted to know how to survive.
For the first couple of years, I really struggled with the language, but I eventually became much more comfortable. I always had this fear in the back of my mind of how I was going to make a living here. I didn’t even think about success at the time – I just wanted to pay my bills. I grew up in Communist China and never had much money to my name, and then all of a sudden I had giant student loans. So naturally I tried to make a buck or two.
One day, about two years after I arrived, a friend of mine who knew my issues said, “If you really want to make money you have to listen to this fellow. He truly knows how to make money.” I wasn’t sure what it was all about. I just remember thinking that there was a “buffet” involved. So I assumed that it was some kind of talk with a free lunch! I said it was a good combination – a free lunch plus a talk about how to make money. So I went. To my dismay there was no lunch. [laughs] There was just a guy with the name “Buffett.”
Mr. Buffett really made a lot of sense during that talk. It was like a punch in my eyes. It was like I had just woken up and a light had switched on. His honesty came through right out of the gate. And I thought this fellow was just so intelligent – he could put very complex ideas into such simple terms. I was immediately drawn to value investing. By the time the lecture was over, I thought that this was what I was looking for; I could do this.
At the time, I couldn’t really start companies, and I didn’t want to work in a big company because of the differences in language and culture. Investing, on the other hand, sounded like it required a lot of reading and mathematics, hard work, and good judgment – I was confident that I could do those things well. And the fundamental principles of value investing appealed to me – buy good securities at a bargain price. If you’re wrong, you won’t lose a lot, but if you’re right you’re going to make a lot. It fit my personality and temperament very well. Warren used to say, “Value investing is like an inoculation – either it takes or it doesn’t.” I totally agree with him.
There are few people that switch in between or get it gradually. They either get it right away or they don’t get it at all. I never really tried anything else. The first time I heard it, it just made sense; and I heard it from the best. I guess it turned out better than a free lunch.
G&D: How did your investing process develop differently from Buffett’s?
LL: Part of the game of investing is to come into your own. You must find some way that perfectly fits your personality because there is some element of a zero sum game in investing. If you buy, somebody else has to sell. And when you sell, somebody has to buy. You can’t both be right. You really want to be sure that you are better informed and better reasoned than the person on the other side of the trade. It is a competitive game, so you’re going to run into a lot of very intelligent, hardworking fellows.
The only way to gain an edge is through long and hard work. Do what you love to do, so you just naturally do it or think about it all the time, even if you are relaxing, and even if you’re just walking in the park. Over time, you can accumulate a huge advantage if it comes naturally to you like this. The ones who really figure out their own style and stick to it and let their natural temperament take over will have a big advantage.
The game of investing is a process of discovering: who you are, what you’re interested in, what you’re good at, what you love to do, then magnifying that until you gain a sizable edge over all the other people. When do you know you are really better? Charlie Munger always said, “I would not feel entitled to a view unless I could successfully argue against the best counterargument of the smartest opponent.” He is right about that.
Investing is about predicting the future, and the future is inherently unpredictable. Therefore the only way you can do it better is to assess all the facts and truly know what you know and know what you don’t know. That’s your probability edge. Nothing is 100%, but if you always swing when you have an overwhelmingly better edge, then over time, you will do very well.
G&D: How did you become friends with Charlie Munger? Do you have a
friendship with Warren Buffett as well?
LL: Charlie and I have some very close mutual friends. Over time, we started talking about businesses, and then it evolved into a strong bond. I view him as a mentor, teacher, partner, and friend, all in one. I am also friendly with Warren, but not nearly as close as with Charlie because Warren is in Omaha. I admire him, and I learn more about him from his writings and deeds than through interpersonal interactions. I have a lot of interaction with Charlie, so I know him both as person and through his writing and personal deeds.
Read the complete interview on this
Graham & Doddsville - Issue 18 - Spring 2013.pdf (Size: 4.14 MB / Downloads: 69)
G&D: How did your unique experience as a Tiananmen Square protest leader lead you to where you are today, running Himalaya Capital?
Li Lu (LL): When I first came to Columbia University, I was dirt poor. I did not choose to come here – I just ended up here because I had nowhere else to go, having just escaped from China after Tiananmen. I was in a new country where I didn’t understand the language, didn’t know anybody, and didn’t have a penny to my name. So I was desperate and afraid. In retrospect, that is good inspiration for trying to figure out how to make money! I just wanted to know how to survive.
For the first couple of years, I really struggled with the language, but I eventually became much more comfortable. I always had this fear in the back of my mind of how I was going to make a living here. I didn’t even think about success at the time – I just wanted to pay my bills. I grew up in Communist China and never had much money to my name, and then all of a sudden I had giant student loans. So naturally I tried to make a buck or two.
One day, about two years after I arrived, a friend of mine who knew my issues said, “If you really want to make money you have to listen to this fellow. He truly knows how to make money.” I wasn’t sure what it was all about. I just remember thinking that there was a “buffet” involved. So I assumed that it was some kind of talk with a free lunch! I said it was a good combination – a free lunch plus a talk about how to make money. So I went. To my dismay there was no lunch. [laughs] There was just a guy with the name “Buffett.”
Mr. Buffett really made a lot of sense during that talk. It was like a punch in my eyes. It was like I had just woken up and a light had switched on. His honesty came through right out of the gate. And I thought this fellow was just so intelligent – he could put very complex ideas into such simple terms. I was immediately drawn to value investing. By the time the lecture was over, I thought that this was what I was looking for; I could do this.
At the time, I couldn’t really start companies, and I didn’t want to work in a big company because of the differences in language and culture. Investing, on the other hand, sounded like it required a lot of reading and mathematics, hard work, and good judgment – I was confident that I could do those things well. And the fundamental principles of value investing appealed to me – buy good securities at a bargain price. If you’re wrong, you won’t lose a lot, but if you’re right you’re going to make a lot. It fit my personality and temperament very well. Warren used to say, “Value investing is like an inoculation – either it takes or it doesn’t.” I totally agree with him.
There are few people that switch in between or get it gradually. They either get it right away or they don’t get it at all. I never really tried anything else. The first time I heard it, it just made sense; and I heard it from the best. I guess it turned out better than a free lunch.
G&D: How did your investing process develop differently from Buffett’s?
LL: Part of the game of investing is to come into your own. You must find some way that perfectly fits your personality because there is some element of a zero sum game in investing. If you buy, somebody else has to sell. And when you sell, somebody has to buy. You can’t both be right. You really want to be sure that you are better informed and better reasoned than the person on the other side of the trade. It is a competitive game, so you’re going to run into a lot of very intelligent, hardworking fellows.
The only way to gain an edge is through long and hard work. Do what you love to do, so you just naturally do it or think about it all the time, even if you are relaxing, and even if you’re just walking in the park. Over time, you can accumulate a huge advantage if it comes naturally to you like this. The ones who really figure out their own style and stick to it and let their natural temperament take over will have a big advantage.
The game of investing is a process of discovering: who you are, what you’re interested in, what you’re good at, what you love to do, then magnifying that until you gain a sizable edge over all the other people. When do you know you are really better? Charlie Munger always said, “I would not feel entitled to a view unless I could successfully argue against the best counterargument of the smartest opponent.” He is right about that.
Investing is about predicting the future, and the future is inherently unpredictable. Therefore the only way you can do it better is to assess all the facts and truly know what you know and know what you don’t know. That’s your probability edge. Nothing is 100%, but if you always swing when you have an overwhelmingly better edge, then over time, you will do very well.
G&D: How did you become friends with Charlie Munger? Do you have a
friendship with Warren Buffett as well?
LL: Charlie and I have some very close mutual friends. Over time, we started talking about businesses, and then it evolved into a strong bond. I view him as a mentor, teacher, partner, and friend, all in one. I am also friendly with Warren, but not nearly as close as with Charlie because Warren is in Omaha. I admire him, and I learn more about him from his writings and deeds than through interpersonal interactions. I have a lot of interaction with Charlie, so I know him both as person and through his writing and personal deeds.
Read the complete interview on this
Graham & Doddsville - Issue 18 - Spring 2013.pdf (Size: 4.14 MB / Downloads: 69)
